Market Analysis
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Market Analysis
Chapter 6
Market Analysis
6.1
Doing Market Research
6.2
Industry and Market Analysis
2
Market Analysis
6.1
Define areas of analysis for industry and
market research.
Discuss how to conduct effective market
research.
Section 6.1 Doing Market Research
3
Market Analysis
6.1
To ensure success, the entrepreneur needs to
understand the industry and the market.
He or she should define areas of analysis and
conduct effective industry and market research.
Section 6.1 Doing Market Research
4
Market Analysis
6.1
industry
carrying capacity
complexity
market
target market
market segmentation
market segments
geographics
psychographics
Section 6.1 Doing Market Research
industrial markets
market research
exploratory research
focus group
descriptive research
historical research
secondary data
primary data
5
Market Analysis
Defining Areas of Analysis
In order to satisfy current
customers or attract new
ones, an entrepreneur must
conduct market analysis.
industry a collection
of businesses with a
common line of
products or services
The entrepreneur will want
to understand the nature of
the industry he or she is
analyzing.
Section 6.1 Doing Market Research
6
Market Analysis
Defining Areas of Analysis
Thorough market analysis requires :
Identifying prospective customers and
determining their buying habits
Analyzing your industry and assessing your
chances for success within it
Section 6.1 Doing Market Research
7
Market Analysis
Industry
There are four factors that are useful in
understanding the nature of an industry:
carrying capacity
uncertainty
complexity
stage of life cycle
Section 6.1 Doing Market Research
8
Market Analysis
Industry
You will want to find an
industry that has carrying
capacity so that your new
business can expand and
prosper.
Section 6.1 Doing Market Research
carrying capacity the
ability of industry to
support new growth
9
Market Analysis
Uncertainty
Uncertainty is the degree of stability or instability in
an industry.
Many high-tech ventures are in industries with
uncertain climates.
Section 6.1 Doing Market Research
10
Market Analysis
Complexity
Some businesses must learn
to deal with complexity in
many industries.
complexity the
number and diversity of
contacts with which a
business must deal.
Firms that operate in
complex industries have
more suppliers, customers,
and competitors than firms
in other industries.
Section 6.1 Doing Market Research
11
Stage of Life Cycle
There are four stages to the life
cycle of an industry.
Section 6.1 Doing Market Research
1
Birth
2
Growth
3
Maturity
4
Decline
12
Market Analysis
Target Market and
Customer
After first identifying your
market, you will then need
to select a target market to
be the focus of your
company’s efforts.
market a group of
people or companies
who have a demand for
a product or service and
are willing and able to
buy it
target market a specific
group of customers whom
a business wishes to
reach
Section 6.1 Doing Market Research
13
Market Analysis
Target Market and
Customer
Consumer market
segmentation is based on
geographics, demographics,
psychographics, and buying
characteristics.
A business can select and
serve multiple market
segments.
Section 6.1 Doing Market Research
market segmentation
the process of grouping
a market into smaller
subgroups defined by
specific characteristics
market segments
subgroups of buyers with
similar characteristics,
segmented by geographics,
demographics,
psychographics, and
buying characteristics
14
Target Market and Customer
Market Segmentation
geographics
demographics
buying
characteristics
psychographics
Section 6.1 Doing Market Research
15
Market Analysis
Target Market and
Customer
Information about the
geographics of the target
market can help an
entrepreneur decide on a
geographic area to focus
marketing efforts.
Section 6.1 Doing Market Research
geographics the study
of the market based on
where customers live,
including region, state,
country, city, and/or area
16
Market Analysis
Target Market and
Customer
An entrepreneur can study
psychographics to learn
about target customers’
feeling.
Section 6.1 Doing Market Research
psychographics the
study of consumers
based on social and
psychological
characteristics, including
personality, values,
opinions, beliefs,
motivations, attitudes,
and lifestyle elements
17
Market Analysis
Target Market and
Customer
Businesses that cater to
industrial markets must
consider customers’
individual situations.
Section 6.1 Doing Market Research
industrial markets
customers who buy goods
or services for business
use
18
Target Market and Customer
The target market for your product
or service should be:
1
Measurable
2
Large enough to be profitable
3
Reachable
4
Responsive
Section 6.1 Doing Market Research
19
Market Analysis
Conducting Market
Research
Once you know the areas of
the market you need to
analyze, you are ready to
begin market research.
market research the
collection and analysis of
information aimed at
understanding the
behavior of consumers in
a certain market
The marketing research
process can be used to
identify potential markets,
analyze demand, and
forecast sales.
Section 6.1 Doing Market Research
20
Select the Type of Market Research
There are three types of market research
exploratory research
descriptive research
historical research
Section 6.1 Doing Market Research
21
Market Analysis
Select the Type of
Market Research
A good way to start
exploratory research is to
read government or industry
publications.
Section 6.1 Doing Market Research
exploratory research
the initial collection and
analysis of information
used when very little is
known about a subject; it
forms a foundation for
later research
22
Market Analysis
Select the Type of
Market Research
Another way to gather
information is to form a
focus group.
Section 6.1 Doing Market Research
focus group a group of
people whose opinions
are studied to determine
the opinions that can be
expected from a larger
population
23
Market Analysis
Select the Type of
Market Research
Descriptive research can
be gathered through
questionnaires, interviews,
or observation.
Section 6.1 Doing Market Research
descriptive research
the collection of
information to determine
the status of something,
such as in developing a
customer profile
24
Market Analysis
Select the Type of
Market Research
You can use historical
research to forecast your
business’s future potential.
Section 6.1 Doing Market Research
historical research
the study of the past to
explain present
circumstances and
predict future trends
25
Start the Research Process
The Five Steps of an Effective Research Plan
5
4
3
2
1
Analyze the data
Organize the data
Collect primary data
Obtain secondary resources
Identify your information needs
Section 6.1 Doing Market Research
26
Market Analysis
Start the Research
Process
Research secondary data
before researching primary
sources because it is easily
obtained and inexpensive.
Section 6.1 Doing Market Research
secondary data
information that has
already been collected by
someone else
27
Market Analysis
Start the Research
Process
The most common methods
of gathering primary data
about customers are:
primary data information
that is collected for the
first time, is current, and
relates directly to the
collector’s study
observation
interviews
surveys
Section 6.1 Doing Market Research
28
Market Analysis
6.1
1. Define areas of analysis for industry and
market research.
Areas of analysis for industry research include carrying
capacity, uncertainty, complexity, and stage of life cycle.
Areas of analysis for market research include identifying
the target market through market segmentation and
conducting target marketing.
Section 6.1 Doing Market Research
29
Market Analysis
6.1
2. Discuss how to conduct effective market
research.
First, identify the focus of the research. Next, select the
type of market research—exploratory, descriptive, or
historical. Finally, start the research process by identifying
your information needs, obtaining secondary resources,
collecting primary data, organizing the data, and analyzing
the data.
Section 6.1 Doing Market Research
30
Market Analysis
6.2
Explain how to research an industry
Describe a customer profile and customer
needs analysis.
Section 6.2 Industry and Market Analysis
31
Market Analysis
6.2
Studying a company’s industry and market helps
an entrepreneur create a product or service that
people want.
It also helps the entrepreneur develop a customer
profile, estimate demand, and increase his or her
chances for success.
Section 6.2 Industry and Market Analysis
32
Market Analysis
6.2
barriers to entry
economies of scale
brand loyalty
mass marketing
market share
Section 6.2 Industry and Market Analysis
niche
market positioning
competitive advantage
customer profile
customer needs analysis
33
Researching the Industry
Look at trends and patterns of change.
Understand industry forces that affect your business.
Study industry demographics.
Analyze the competition.
Section 6.2 Industry and Market Analysis
34
Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology
Section 6.2 Industry and Market Analysis
35
Market Analysis
Industry Forces That
Affect Your Business
In established businesses,
the dominant businesses
have advantages that are
barriers to entry to
smaller, new ventures.
Section 6.2 Industry and Market Analysis
barriers to entry
conditions or
circumstances that
make it difficult or costly
for outside firms to enter
a market to compete
with established firm or
firms
36
Market Analysis
Industry Forces That
Affect Your Business
Established businesses
have achieved economies
of scale in production,
marketing, and distribution.
Section 6.2 Industry and Market Analysis
economies of scale
situations where the cost
of producing one unit of a
good or service decreases
as the volume of
production increases; the
decrease of production
costs relative to the price
of goods and services
37
Market Analysis
Industry Forces That
Affect Your Business
Customers with brand
loyalty do not easily switch
to a new company that
enters the industry.
Section 6.2 Industry and Market Analysis
brand loyalty the
tendency to buy a
particular brand of a
product
38
Market Analysis
Issues in Entrepreneurship
In the past, businesses
used mass marketing to
sell products with universal
appeal and few features to
differentiate them from
competitors’ products.
Section 6.2 Industry and Market Analysis
mass marketing the
attempt to reach all
customers with a single
marketing plan
39
Market Analysis
The Competition
Usually, competing
products are already
established in the market.
market share a
portion of the total sales
generated by all
competing companies
in a given market
To succeed, you must be
able to capture market
share by differentiating
your business.
Section 6.2 Industry and Market Analysis
40
Market Analysis
The Competition
Many entrepreneurial
companies succeed by
studying the competition to
define a niche in the
market.
Section 6.2 Industry and Market Analysis
niche a small,
specialized segment of the
market based on customer
needs discovered in
market research
41
Market Analysis
The Competition
An entrepreneur who wishes
to capture market share can
use market positioning.
Section 6.2 Industry and Market Analysis
market positioning the
act of identifying a specific
market niche for a product
42
Market Analysis
The Competition
You can create a
competitive grid to help
define your competitive
advantage.
Section 6.2 Industry and Market Analysis
competitive advantage
a feature that makes a
product more desirable
than its competitors
43
Researching the Target Customer
Create a customer profile.
Evaluate customers’ needs.
Forecast research to forecast demand.
Conduct
Section 6.2 Industry and Market Analysis
44
Market Analysis
Creating a Customer Profile
Creating a customer profile
is the first step in targeting
your marketing efforts.
Section 6.2 Industry and Market Analysis
customer profile a
complete picture of
a venture’s
prospective customers,
including geographic,
demographic, and
psychographic data
45
Market Analysis
Evaluating Customers’
Needs
In order to provide what the
customer wants, you should
prepare a customer needs
analysis.
Section 6.2 Industry and Market Analysis
customer needs
analysis a study that
pinpoints the features
and benefits of goods or
services that customers
value
46
Market Analysis
Forecasting Demand
Several methods can be used to forecast demand:
Use historical analogy.
Interview prospective customers and
intermediaries.
Go into limited production.
Section 6.2 Industry and Market Analysis
47
Market Analysis
6.2
1. Explain how to research an industry
To research an industry, look at trends and
patterns of change, industry forces that affect
your business, industry demographics, and the
competition.
Section 6.2 Industry and Market Analysis
48
Market Analysis
6.2
2. Describe a customer profile and customer
needs analysis.
A customer profile is a complete picture of a venture’s
prospective customers. It includes geographic,
demographic, and psychographic data. A customer
needs analysis pinpoints the features and benefits of
your goods or services that customers value so you can
provide them with what they want.
Section 6.2 Industry and Market Analysis
49
Market Analysis
Domain Names
A company’s domain name is much more than the way
customers can get to its Web site.
Domain names have become a crucial component of
companies’ marketing and branding plans.
Section 6.2 Industry and Market Analysis
50
Market Analysis
Tech Terms
country code top-level domain (ccTLD)
the part of the TLD that indicates the country of the Internet address,
such as .us for United States and .fr for France
generic top-level domain (gTLD)
the part of a TLD that indicates the type of Web site on the Internet
address, such as .com for commercial, .edu for educational, .org for
organization, .gov for government, .mil for military, and .biz for business
Internet Corporation for Assigned Names and Numbers (ICANN)
a nonprofit regulatory body that oversees domain name registration
Section 6.2 Industry and Market Analysis
51
Market Analysis
Tech Terms
registrar
a company that registers and sells Web site domains
top-level domain (TLD)
the most general part of a domain name in an Internet address
Section 6.2 Industry and Market Analysis
52
End of
Market Analysis
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